Caroline Whistler, advisory services co-founder and partner for Third Sector, said the PFS model represents a new type of government performance-based contract.

“The general purpose of this grant is, really at a high level, to engage potential government partners at the county-level, and engage and educate them about the Pay for Success opportunities in these two areas,” Whistler said.

“So rather than putting the kid, the victim and the community through the entire traditional justice system these kids, these youth, have an opportunity to do something different, and as a result, they’re not going to jail, they’re not being placed in custody.”

PFS programs are outcome-centered, with most of the financing coming from non-foundation or agency streams. Under the model, local governments only pay for services if the programs yield positive outcomes.

“Because governments don’t have to put up the money initially, you’re able to think about innovation and differentiation from what is traditionally being done,” said NCCD President Alex Busansky. “And it helps out with some of the frequently upfront costs of any kind of innovation that might be too onerous for many jurisdictions to take on.”

The traditional juvenile justice system, he said, displaces far too many young people from their homes, schools and neighborhoods. One area the NCCD is focusing on in the feasibility study is the development of restorative justice alternatives.

“So rather than putting the kid, the victim and the community through the entire traditional justice system,” he said, “these kids, these youth, have an opportunity to do something different, and as a result, they’re not going to jail, they’re not being placed in custody.”

Another focal point of the PFS grant is improving outcomes for the state’s foster care youth, primarily through targeting interventions to reduce placement disruptions.

“You’re going to see an average of around seven moves during a typical span of time in foster care,” he said. “For many kids, after the second or third move, they’re not going to another family, they’re going into congregate care.”

The PFS model, he said, may draw new funders and investors into areas like child welfare and juvenile justice, which many are not currently participating in.

“When we look at Pay for Success, I think we’re looking at a space that is ripe to bring new people in,” he said. “And I want to do it in a way that’s replicable and imitable by other jurisdictions across the country, and not just in California.”

The PFS outcome-based contracting model encourages social innovation financing (SIF), whether from philanthropists, impact investors or commercial lenders, Whistler said. Successful PFS-funded pilot programs could encourage county-level governments to make new investments in juvenile detention alternatives and prevention programming. And in areas where governments are already investing, the model could help agencies become more performance-driven, she said.

“It could really encourage governments to sort of take the risk of this pilot,” Whistler said. “And if these programs, through social innovation financing, prove successful, it could actually convince government to reallocate more dollars.”

Working in tandem with the NCCD, she said, allows Third Sector to share child welfare and juvenile justice data. In turn, that information can be used to help construct performance-based contracts.

“The intent of the California Endowment is that we’re going to focus now on two really critical areas for pilots,” Whistler said. “But the hope is that we will create models that can be replicated across counties — certainly in California, and potentially outside the state as well.”